A discussion yesterday with a friend got me to try the near-impossible: defining the reasons for the credit crunch in a few words.
I got it down to "excess liquidity and the slackness of product creation associated with it".
It's not bad but I'd like to add the phrase "environment of complicity" in there somewhere too, because I like it.
And that excess leverage? Where did that come from? Largely from the central banks, cutting interest rates to the bone through the first half of the decade, but also the authorities cutting back on regulations.
Here's some detail on the SEC slashing its leverage limits on broker dealers. Only five were given exemptions, and three of those (Bear Stearns, Lehman, Merrill) no longer exist. The other two? Goldmans and Morgan Stanley.
20 hours ago